The following information pertains to Havana Corporation\'s defined benefit pens
ID: 2598431 • Letter: T
Question
The following information pertains to Havana Corporation's defined benefit pension plan:
($ in 000s)
2016
2017
Beginning
balances
Beginning
balances
Projected benefit obligation
($6,000)
($6,504)
Plan assets
5,760
6,336
Prior service cost-AOCI
600
552
Net loss-AOCI
720
786
At the end of 2016, Havana contributed $696 thousand to the pension fund and benefit payments of $624 thousand were made to retirees. The expected rate of return on plan assets was 10%, and the actuary's discount rate is 8%. There were no changes in actuarial estimates and assumptions regarding the PBO.
Assume the loss on plan assets (or the negative unexpected returns on plan assets) was $72,000 (Note this is a loss).
Using information provided for Havana Corporation and the above assumption, calculate the amortization of Net loss-AOCI for the year 2016:
($ in 000s)
2016
2017
Beginning
balances
Beginning
balances
Projected benefit obligation
($6,000)
($6,504)
Plan assets
5,760
6,336
Prior service cost-AOCI
600
552
Net loss-AOCI
720
786
Explanation / Answer
Ans is A $6,000
Explanation: Amortization of net loss can be determined either by corridor approach or by year end balances given.
Since information for corridor approach is not sufficient, we simply took the balances of year end to compute the amortization amount.
2016 Amount of net loss = 720,000
Add: Net loss for the year = 72,000
Total balnce should be = 792,000
Actua balance 2017 beginning = 786,000
Amout amortized = (792,000-786000) = 6,000
Related Questions
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.